Could proposed Bumi policies salvage the Johor market?

The Johor’s housing market is facing a predicament – as disclosed by the state government in recent media reports, over 88,000 units of Bumiputra (Bumi) properties have remained unsold up to date. Developers are scratching their heads over these units that are in a limbo and have called for a revision of housing policies that will help them clear off these idle units.

The beef over Bumi lots

Under the New Economic Policy (NEP), the Bumi Lot Quota Regulation was introduced to increase Bumiputera shares in real estate up to at least 30%. As of 1971, developers must allocate at least 30% of their residential/ commercial development as Bumi lots, where the units can be sold to Bumiputera buyers only. These purchasers are entitled to a Bumi discount too, which ranges from 7-15%.

Under the Malaysian law, state authorities are given full control over land matters and as such, Bumi quota regulations fall under the State Government’s jurisdiction causing them to differ from state to state.

In Johor, developers are required to build 40% affordable homes within each project; where these properties must be priced between RM150,000 and RM250,000. The remaining 60% are homes made available to the free market and out of this, 40% must be reserved for Bumiputeras buyers, where a 15% discount off the selling price is given.

Since the Bumi lot requirement is made mandatory by the state authority, developers must conform to it, albeit exceptions are given out only to special projects. By and large, however, a Bumi lot has restricted marketability and its rsale price could dampen quite a bit. The hassle involved in obtaining a waiver from the Land Office and the high rejection potential are huge deterrents.

Homing in on the unsold issue

The state government have heard developers’ pleas for assistance and support in solving the unsold units’ conundrum. Taking a step in the right direction, a special committee, JPPP (Jawatankuasa Panel Penasihat Perumahan Johor) was formed recently to study and improvise the state’s housing procedures, especially in regards to the release of Bumiputera properties to non-Bumi purchasers.

During a state legislative assembly in May, Datuk Md Jais Sarday, Johor’s new Housing and Local Government Committee Chairman shared that the committee has submitted a 10-point proposal to the state government for consideration. As Datuk Jais mentioned in a recent media interview, developers are facing a lot of constraints because of holding on to the Bumi units for long periods.

The main one being cash flow problems, which leads to delays in construction of new projects. Datuk Md Jais Sarday agrees that the need to find a win-win situation to address this issue is imperative as the state requires developers to continue building affordable homes for the rakyat.

The proposed guidelines by the special committee are detailed on the right:

Conclusion

Ultimately, the proposed policies must not be a zero sum game. In a free market economy, market forces cannot be tampered with unless careful policies are put in place to ensure a fair playing ground. Make no mistake, the interest of Bumiputeras must be taken care of, but we would not want to create a bigger problem down the road while trying to solve an existing one.